The new thinking of gas as a global transition fuel has got to be a second opportunity for Nigeria to reposition and take advantage of the new demand and supply gaps to deploy her gas reserves as the catalyst for development and industrialisation while taking centre stage as a leading gas nation supplying most of Africa, Europe, and rest of the world.
Available data, shows that Nigeria currently has over 206 trillion cubic feet, TCF, of proven gas reserves with massive potential to become top five in the league of Qatar, USA and Russia as a gas superpower.
According to industry operators Nigeria must crank the engine on gas to bring about massive developments deploying and taking advantage of the Petroleum Industry Act, PIA but also being very deliberate about the focus on gas with thoughts around exclusive moratorium to create more gas development incentives and waivers to inspire new investments in the gas value chain.
According to Amaopusenibo Engineer Tony Attah, Independent Energy Consultant
“We must take advantage of the ongoing work on the declared “Decade of Gas” programme which is meant to form the bedrock of how we transition Nigeria into a full-fledged gas economy as a national priority and a key element of the new national agenda for the oil and gas industry,”he said.
Attah, also, pointed that the other key components of the new agenda must be hinged on gas development, specifically on deliberate gas exploration to rebase the country’s gas reserves, and consideration for more attractive fiscals to incentivise further gas developments, infrastructure investments and cost reflective pricing for the domestic and export gas supplies.
Essentially government needs to do everything including granting additional and far-reaching fiscal incentives focused on gas development as the main pillar on which our industrialisation will be built and also for global exports as a key forex revenue earner for the nation.
He noted that the potential 5 billion cubic feet per day, BCF/D, local market for gas is huge and we must domesticate a significant part of our gas development to drive our national economy.
This focus on gas should also result in a structural improvement of the current ministerial portfolios to create a critical position solely to focus on gas development – the “Minister for Gas” should be tasked with doing every and anything possible and necessary to ensure all the gas policies and guidelines cum initiatives are brought to fruition as part of the call to declare emergency on gas and power development in Nigeria.
Slowed Local Market Utilisation
Nigeria has witnessed decades of non gas utilisation and development at the domestic market.
Much as the Nigeria Liquified Natural Gas, NLNG Limited, has continuously reassured its commitment to supply 100 per cent of all its Liquified Petroleum Gas (LPG) production (butane and propane) to the Nigerian domestic market, the consuming public is yet to see it reflect on prices and availability pressure on feedgas and market challenges.
Interestingly, on the 29 March 2021, the federal government declared the ‘Decade of Gas’ specifically designed to ensure that the nation takes advantage of the global energy transition.
It is intended to get stakeholders buy-in to optimise the country’s gas resources throughout the new decade. This resolve was accompanied by a call to boost the widespread utilisation of all forms of gas products, from compressed natural gas (CNG) to Liquified Natural Gas, LPG, in Nigeria. Nigeria’s gas sector is still largely underdeveloped with gas products struggling to gain domestic market acceptance but LPG seems to stand out of the pack, with increasing domestic adoption.
Indeed and quite frankly too, the LPG has a wide variety of uses, ranging from automotive fuel to chemical feedstock, though however, its primary use in Nigeria has been domestic.
Figures presently show that LPG currently constitutes about five per cent of Nigeria’s household energy mix and this figure continues to increase exponentially.
It was reported that Nigeria’s domestic consumption of LPG increased from 250,000 metric tones in 2013 to over one million tonnes in 2020—an increase of over 300 per cent within seven years. This rapid increase in LPG adoption is a major indicator of Nigeria’s position as one of the fastest-growing LPG markets in the world.
While the growing LPG adoption rate undoubtedly holds huge promise for Nigeria’s clean energy agenda due to LPG’s low carbon intensity, Nigeria does not appear to be ready for large-scale LPG adoption in its domestic market. This unreadiness is due to a number of bottlenecks including a low level of regulation of the LPG retail market, shortage of LPG facilities, and an unresolved cylinder crisis in the country.
Nigeria’s LPG retail market on one hand is challenged by poor regulation, primarily because during the enactment of the 1969 Petroleum Act, Nigeria’s primary oil and gas regulatory law, gas resources were not paid sufficient attention and, consequently, the Petroleum Act has been largely oil-focused.
The government is close to rectifying this with the recently passed PIA.
So, the absence of adequate regulation has resulted in the widespread presence of unregistered and illegal LPG operators, with dire consequences.
For instance, although LPG decanting has been shown to increase the risk of explosions, the practice of LPG decanting continues to be widespread, with unregistered roadside gas refilling shops littered all over the country decanting LPG to consumers.
The prevalence of illegal LPG operators has not only culminated in immense losses for gas investors; it has also endangered the lives of Nigerians.
As the LPG market continues to grow, illegal operators will continue to act, posing an increasing risk to public safety and government is expected to intensify efforts towards clamping down on illegal LPG operators.
Genuine operators have suggested the adoption of a whistle-blowing channel for communities to report suspected illegal LPG operators. These whistle-blowing channels could be made effective by the adequate sensitisation of community members to the dangers of illegal LPG operations.
In addition, Nigeria has a dearth of LPG facilities as the LPG transportation network is weak, with the absence of a rail or pipeline distribution network.
This is also in addition to the problem of inadequate storage facilities and bottling plants.
Confirming this situation, the NLNG’s managing director/chief executive officer, Dr. Philip Mshelbila, at the Nigerian Association of LPG Marketers (NALPGAM) 35th Annual General Meeting in Port Harcourt, Rivers State, said the market is challenged.
He stated that there were challenges which have slowed the utilisation of LPG in the country, which include the inability of the market to completely absorb NLNG’s propane production, leading to its sparse export of propane to avoid tank-top situations at its plant.
“When we made that commitment last year, the intention was that every molecule of butane and propane that we produce in our facility will come into the domestic market and since then we have made every effort to keep to that since January 2022. We have been successful in achieving supply of 100% of our butane production. We have not been able to reach 100% with propane, not because we don’t want to but because the market capacity to absorb the propane is just not there. We intend that all the butane and all the propane that we produce goes into the domestic market whether propane is being used to blend with butane as cooking gas, used as autogas, or used in industry to generate power,” he said.
“Our production capacity as NLNG can supply about 400,000 tons per annum which is somewhere roughly about 40% of the current national demand. This means that the balance has to be imported. Last year, we supplied about 400,000 tons per annum into the Nigerian market. But we did that under extremely difficult circumstances where our gas supply into our plant was heavily compromised by numerous upstream factors, the single biggest one of which is crude oil theft. And as a result of the disruption that this created, our capacity utilisation fell. Unfortunately, that remains the case today. If we have more gas input to our plant, we can produce more LPG. So the issue of supply for us starts with addressing the upstream supply challenges, the biggest of which is crude oil theft,” he added.
He said the NLNG’s Board had decided to commit all its LPG products to the domestic market to change the narrative of LPG being exported amidst difficulties faced by Nigerians in accessing energy. He stated that despite NLNG’s commitment to 100% LPG supply into the market, some local producers still export LPG out of the country. He called on all stakeholders to collaborate in reversing the trend.
He described the Decade of Gas plan, which was fully sponsored by NLNG, as one of the most comprehensive plans in the industry. He said stakeholders in the industry will need to work collaboratively to ensure implementation, which will unleash and unlock LPG potential in the country. He said the aim would be to saturate the market which will result in fall in price and excess gas can then be exported as a source of income for the country.
“I think that we need some favourable government policies concerning LPG pricing. We need a utilisation policy that encourages the deepening of this market. The government will need to adopt a phased removal of kerosene subsidies. We all know the challenges that subsidies provide as a whole,” he said.
